Euro Dips as Trump Warns of 30% Tariffs on EU

By Rae Wee

SINGAPORE () - The euro dropped to a three-week minimum at the start of Monday, as the Mexican peso faced challenges following U.S. President Donald Trump's warning to implement a 30% tax on goods coming from two major U.S. trade allies starting in August.

On Saturday, Trump unveiled new tariffs through individual letters addressed to European Commission President Ursula von der Leyen and Mexican President Claudia Sheinbaum, which were shared on his Truth Social platform.

The European Union and Mexico both called the tariffs unjust and damaging, with the EU stating it will prolong its hold on retaliatory actions against U.S. taxes until early August and keep pushing for a mutual agreement.

The reaction in the foreign exchange market to Trump's most recent tariff warnings was mostly calm in Asian trading sessions, although the euro fell to approximately a three-week low at the start of the period.

The common currency eventually recovered somewhat and closed down 0.12% at $1.1679.

The U.S. dollar increased by 0.25% against the Mexican peso, reaching 18.6699.

In other areas, the dollar saw only minor increases, as the British pound fell by 0.07% to $1.3481, whereas the Japanese yen increased by 0.1% to 147.28 against the dollar.

Investors have become more accustomed to Trump's ongoing warnings about tariffs, as his most recent disruption in international trade has had minimal impact on U.S. stock markets, which continue to hit all-time peaks, and only provided a small increase for the dollar.

"Financial markets appear to be less responsive to President Trump's tariff warnings these days, following numerous such announcements over the past several months," noted Carol Kong, a currency analyst with Commonwealth Bank of Australia.

Based on the modest market response, investors may believe that Trump's recent warning is merely a tactic to gain additional advantages.

In other currencies, the Australian dollar declined by 0.14% to $0.6565, whereas the New Zealand dollar dropped 0.4% to $0.5984.

In addition to tariff updates, Trump stated on Sunday that it would be "a great thing" if Federal Reserve Chairman Jerome Powell resigned, continuing his previous warnings against the central bank's autonomy by urging lower interest rates.

Merchants may gain a clearer indication of the upcoming direction of U.S. interest rates when the June inflation figures are released on Tuesday, with predictions suggesting that U.S. consumer prices increased marginally during the previous month.

Currently, markets are factoring in more than 50 basis points of Federal Reserve rate cuts by December.

In Asia, reports from Monday indicated that China's exports gained strength in June, with imports also showing recovery, as exporters hurried to send goods in an effort to take advantage of a delicate trade agreement pause between Beijing and Washington before Trump's scheduled deal deadline in August.

Nevertheless, the numbers had minimal impact on the yuan, as the onshore currency remained nearly unchanged at 7.1704 per dollar. The offshore version increased marginally to 7.1713 per dollar.

Investors will be watching the publication of China's gross domestic product data on Tuesday next to gain more insight into the condition of the world's second-biggest economy.

China's growth is anticipated to have decelerated during the second quarter after beginning the year strongly, as ongoing trade conflicts with the United States intensified downward price pressures.

(Covered by Rae Wee; Edited by Lincoln Feast and Christopher Cushing)